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Ratings firm Egan-Jones cut its credit rating on the U.S. government to “AA-” from “AA,” citing its opinion that quantitative easing from the Federal Reserve would hurt the U.S. economy and the country’s credit quality.

The Fed on Thursday said it would pump $40 billion into the U.S. economy each month until it saw a sustained upturn in the weak jobs market. (Read more: Fed’s ‘QE Infinity’ — Four Things That Could Go Wrong)

In its downgrade, the firm said that issuing more currency and depressing interest rates through purchasing mortgage-backed securities does little to raise the U.S.’s real gross domestic product, but reduces the value of the dollar.

In turn, this increases the cost of commodities, which will pressure the profitability of businesses and increase the costs of consumers thereby reducing consumer purchasing power, the firm said.

In April, Egan-Jones cuts the U.S. credit rating to “AA” from “AA+” with a negative watch, citing a lack of progress in cutting the mounting federal debt.

Moody’s Investors Service [MCO 43.82 0.07 (+0.16%) ] currently rates the United States Aaa, Fitch rates the country AAA, and Standard & Poor’s rates the country AA-plus. All three of those ratings have a negative outlook.

By announcing another massive economic stimulus program just weeks before the election, Federal Reserve Chairman Ben Bernanke delivered a vicious sucker-punch to the Romney campaign and may have rigged the election in favor of Obama. But his actions will likely have disastrous consequences for the American public after the election is over.

So far, Romney has run a rather lackluster campaign, refusing to attack Barack Obama’s character and refusing to attack Obama’s radical past and associations with the likes of Jeremiah Wright and Bill Ayers. And Obama’s attempts to paint Romney as a heartless, greedy rich man have failed, as it has become increasingly clear that Romney is a genuinely caring, patriotic, and decent man.

Too decent, perhaps, to understand that his “Goody Two-Shoes” approach may not work against the cutthroat crew of Chicago pols in Washington. Romney, speaking honestly — but, perhaps, stupidly — announced that if elected President, he would not reappoint Bernanke as Chairman of the Fed when Bernanke’s term expires in 2014. Thus, Romney not only gave Bernanke a fixed date upon which he would become unemployed, he also gave Bernanke plenty of time and motivation to leverage the enormous power of the Fed against his campaign.

Bernanke’s gambit is designed almost entirely to undercut the main pillar of the Romney campaign: that the economy remains moribund and that Obama is unqualified and incompetent to fix it. On Thursday, Bernanke announced a third round of “quantitative easing,” which is simply an Orwellian euphemism for “printing money” — and the Fed has already printed about $2 trillion of it since 2009.

The Fed will also purchase mortgage-backed securities and Treasury debt to the tune of $40 billion per month – indefinitely – and keep interest rates at virtually zero until 2015.

The upshot of these policies is to cause a temporary illusion of economic revitalization just prior to the election. The Fed’s actions have already goosed the Dow Jones by over 200 points; the purchase of Treasury debt will continue to allow the government to maintain another year of $1-trillion-plus deficit spending; and the purchase of mortgage-backed securities may cause a temporary blip in housing starts by October.

Obama — and a fawning media 100% in his hip pocket — will point to headlines about a rising stock market and increased housing starts as proof that the private sector is “doing fine” and claim that he deserves another four years of economic stewardship. October 401(k) reports will show a rise in stock-based portfolios, and retirees and conservative investors making zero on CDs and savings accounts will be prompted to vote for the party that promises them more government benefits. Advantage: Obama.

The illusion will collapse almost immediately after the election. Capital gains taxes are scheduled to rise in January, making a mass exodus from the artificially-inflated stock market a possibility in December. The “Bush tax cuts” are also set to expire, and the overall half-trillion tax hike in 2013 will throw the economy back into recession while the country is $16 trillion-and-counting in debt. The Fed’s $40 billion-per-month of “quantitative easing” could kick off inflation, led by rising prices in the energy sector — exacerbated in no small part by Obama’s unwillingness to approve the Keystone pipeline, approve domestic drilling, or impose order on the Middle East.

But Obama will have his second term to finish “transforming” America, and Bernanke will get his reappointment.

CNSNews.com – The House of Representatives overwhelmingly passed a bill 327-98 this week to audit the Federal Reserve but the Democrat-controlled Senate is not expected to take up a similar measure there, even though Senate Majority Leader Harry Reid D-Nev. strongly favored auditing the Federal Reserve System several years ago.

On January 25, 1995, Reid argued in favor of an amendment by then Senator Byron Dorgan D-N.D. that would require the Federal Reserve to a prepare a report to Congress and disclose the financial impact of changing interest rates on the public and private sector.

“I have sponsored legislation that would call for an audit of the Federal Reserve System. I offer that amendment every year. Every year the legislation gets nowhere. I think it would be interesting to know about the Federal Reserve. I think we should audit the Federal Reserve,” Reid said.

He continued, “Its taxpayers money that’s being used there but we dont do that. Senator Dorgan has spoke out on the secrecy of the Federal Reserve System. Hes spoken out on the Federal Reserve more than anyone that I know in either body.”

“But even though there is no entity in the world that controls our lives more than the Federal Reserve System, his speeches go unnoticed Im sorry to say,” Reid said.

But the House overwhelmingly adopted his longstanding proposal to audit the Federal Reserve Wednesday, in a 327-98 vote.

In fact, Paul had joked with fellow lawmakers about being invited to a leadership meeting earlier in the week to discuss his bill. Paul noted he had never before attended such a conclave in his entire congressional career. That career is just about over, as the 77-year-old lawmaker plans to retire at the end of this year after a quarter-century in Congress and three quixotic presidential bids. And the passage of his Fed bill marks a fitting legislative capstone.

The “audit the Fed” package was a key part of Pauls larger economic vision.

The measures consideration on the House floor shows how Pauls brand of libertarianism has moved from an often-dismissed fringe to the mainstream.

Paul announced in 2011 that he would not seek reelection to his congressional seat while running for the 2012 Republican presidential nomination. He ceased campaigning in May and has since returned to the Capitol full-time.

The legislation has no path forward in the Senate. But Paul advocated for increased transparency at the central bank charged with setting interest rates in the same way he has for decades.

“I think when people talk about independence and having this privacy of the central bank means they want secrecy, and secrecy is not good,” Paul said during Tuesday floor debate on his bill. “We should have privacy for the individual, but we should have openness of government all the time, and weve drifted a long way from that.”

Meanwhile, Democrats like House Minority Whip Steny Hoyer, D-Md., argued a full audit would politicize the Federal Reserve.

“The Fed, like every other major central bank in the world, is independent and Congress has rightly insulated the Fed from short-term political pressures,” Hoyer said.

Hoyer declared earlier in the week he would advise Democratic members to vote no. Ninety-seven did. But 89 voted yes, ushering Pauls bill to passage with a comfortable margin.

Paul introduced hundreds of bills during his House tenure — many of them aimed at weakening the Federal Reserve — but rarely built coalitions to bring them to the floor.

But Pauls crusade to audit the Fed has found its way in major legislation in the past. In 2010, he won a provision in the Dodd-Frank financial regulation overhaul that required a limited audit of the Federal Reserve.

The Federal Reserve will expand its program to replace short-term bonds with longer-term debt by $267 billion through the end of 2012 as policy makers lowered their outlook for growth and employment.

The continuation of Operation Twist “should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative,” the Federal Open Market Committee said today in a statement at the conclusion of a two-day meeting in Washington.

“If we don’t see continued improvement in the labor market, we’ll be prepared to take additional steps if appropriate,” Fed Chairman Ben S. Bernanke said at a news conference after the meeting. He said those steps might include additional asset purchases.

Bernanke and fellow policy makers are taking steps to shore up the world’s largest economy as faltering growth leaves it vulnerable to fallout from the European debt crisis and looming fiscal tightening in the U.S. Payrolls expanded at the slowest pace in a year in May, and the jobless rate has been stuck above 8 percent since February 2009.

The yield on the 10-year Treasury note rose to 1.64 percent at 2:25 p.m. in New York from 1.62 percent late yesterday. The Standard & Poor’s 500 Index fell 0.5 percent to 1,351.65 after declining as much as 0.9 percent.

“Growth in employment has slowed in recent months, and the unemployment rate remains elevated,” the FOMC said. “The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually.”

That’s the question asked by Steven Cunningham in an article at IDB today. He believes it possible that by late 2013, the massive amount of cash dumped into the economy by the Federal Reserve might serve as a catalyst for a round of high inflation:

Since the economic meltdown began in 2008, the Fed has pumped an unprecedented amount of money into bank reserves. In 2011 alone, adjusted bank reserves increased at a compounded annual rate of 47.1%. As these bank reserves filter into the business and consumer economy, the risk of inflation rises.

(CNSNews.com) – Federal Reserve Chairman Ben Bernanke said that the current trajectory of the federal budget – marked by large annual deficits – was “clearly unsustainable” and that “serious economic consequences” could result.

“Having a large and increasing level of government debt relative to national income runs the risk of serious economic consequences,” Bernanke told the Senate Budget Committee Tuesday.

“Even the prospect of unsustainable deficits has costs, including an increased possibility of a sudden fiscal crisis. As we have seen in a number of countries recently, interest rates can soar quickly if investors lose confidence in the ability of a government to manage its fiscal policy.”

Bernanke said that while nobody knows when a fiscal crisis will come, it is surely “ever closer.”